Survivability Report

8 May 2013

Table of Content

• Executive Summary

• Background

• Rounds of Financing

• Issues

• Forecast/Product Development

Cycle

• Recommendations

Executive Summary

• —Tesla is a fast growing Electric Vehicle

Company

• —Current financial risks:

• —Over-leverage, high R&D costs,

insufficient sales and other

operational cost burdens

• —Three Options for Sustainability:

• —Stabilize in the growth product life

cycle and control costs

• Raise more equity

• —Merge with another company

0 5 10 15 20

Daimler

Ford Motor

Toyota

GM

p/e ratios for selected motor companies

-200%

-100%

0%

100%

200%

300%

400%

500%

600%

700%

2009 2010 2011 2012

Net Loss as % of Sales

R&D as % of Sales

Sales Growth

Background • —Founded 2003

• —Business model

• —Selling Electric Vehicles and

• —Electric power train components

• —Vision: Intends to mass produce

electric vehicles

• —Strategy: Sell high range models in

order to finance development of

mass produced models

—

• ——Tactic: Sell only through Tesla’s

showrooms

• —3,000 Employees

• —Market Capitalization of $6.3billion

(6 May 2013)

• —Headquartered in California, USA

Background (cont'd)

• —Two car models – Roadster, Model-S

• —Roadster is a high range sports car model with

price tag of >US$100,000

• —Model-S is a sedan with price tag of

~US$60,000

• —Currently planning a Model-X (SUV) in

cooperation with Toyota

• —Also planning a Bluestar version (2016-17)

which will sell for US$30,000

Rounds of Financing

First Round

• Elon Musk

• Compact Tech

• SDL Ventures

• Private Investors

US$7.5mln

Second Round

• Elon Musk

• Valor Equity

• Others

US$13mln

Third Round

• Elon Musk

• Google co-founders

• Ebay president

• VC firms

US$40mln

Fourth Round

• Elon Musk

• Others

US$45mln

Fifth Round

• Elon Musk

• Others

US$40mln

Equity Sale to

• Daimler

• Other

US$50mln

DOE debt

US$465mln

Sixth Round

• Elon Musk

• Daimler

• Others

US$82.5mln

IPO

US$226mln

Jun 2010

Sept 2009 May 2009

Jun 2009 Feb 2008 May 2006

May 2007

Total equity raised before IPO = US$285mln

pre-May 2006

pre-May 2006

Issues: Financial Position

• —Over-leverage

o —LT Debt-Equity ratio of 374.2%

• —Strained liquidity - low current ratio of 1

• —Negative cashflow from

operations/investing activities @ -86% of

sales

o —Insufficient sales volume

o —Rising R&D costs 3 year average of 179%

o —Growing inventory

o —Cost inefficiencies – third party

plants/showroom investment

• —In general, Tesla faces the risk of

bankruptcy

Yet, Stocks trade around US$57

Toyota

Ford

GM

Tesla – 80% appreciation since IPO

Paccar

Forecast (current trend – worst case)

Tesla cannot sustain the current trend, which will require funds for over $6 Billion in 4 years.

Operating Ratios: 3 yr Av

Sales growth rate 60.62%

Op costs / Sales 206.60%

Cash / Sales 117.00%

Inventory / Sales 42.70%

Net plant / Sales 130.10%

Million US$ Actual Forecast Forecast Forecast Forecast

Income Statement 2012 2013 2014 2015 2016

Sales $413.3 $663.8 $1,066.2 $1,712.5 $2,750.5

Costs (excl. depr.) 780.3 1,371.4 2,202.7 3,537.9 5,682.6

Depreciation 28.8 55.3 88.8 142.6 229.0

Total op. costs $809.1 $1,426.6 $2,291.4 $3,680.5 $5,911.6

EBIT -$395.8 -$762.8 -$1,225.3 -$1,968.1 -$3,161.1

Net operating profit after taxes -$257 -$496 -$796 -$1,279 -$2,055

Net operating working capital $213 $785 $1,261 $2,026 $3,254

Total operating capital $775 $1,649 $2,648 $4,254 $6,832

FCF = NOPAT – Δ op capital N/A -$1,369 -$1,796 -$2,885 -$4,633

YEAR 2013 2014 2015 2016

Required Increase in Assets $881.77 $1,209.95 $1,943.42 $3,121.53

Less Spontaneous Increase in Payables and

Accruals $ 8.59 $ 189.12 $ 303.76 $ 487.90

Less Addition to Retained Earnings $0.0 $0.0 $0.0 $0.0

Additional Funds Needed to Support Growth $873.18 $1,020.83 $1,639.66 $2,633.63

Product Development Cycle

http://www.thestreet.com/story/11759628/1/tesla-

motors-pollutes-today-for-a-greener-tomorrow.html September 2010: "Its working capital was about $90 million in the red, and its stockholders were under water to the tune of $28 million. The only thing that saved Tesla from pre-election disaster was a last-minute offering that scored $222 million in new investor cash in early October."

What now? Second IPO?

Roadster

Model-S

Pre-2007 2012+

Model-X/

Bluestar?

Forecast (best case)

Million US$ Actual Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast ForecastOperating Ratios : 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Sales growth rate 102.34% 80% 60% 60% 50% 40% 30% 20% 15% 10% 5%

Op costs / Sales (85% Ind. Av.) 188.81% 120% 90% 80% 70% 60% 60% 60% 75% 75% 75%

Cash / Sales (25% Ind. Av.) 53.47% 39% 32% 28% 28% 28% 28% 28% 28% 28% 28%

Inventory / Sales (10% ind Av.) 64.97% 45% 30% 29% 25% 25% 25% 20% 15% 10% 10%

Net plant / Sales (20% Ind. Av.) 136.07% 84% 59% 40% 33% 30% 20% 20% 20% 20% 20%Acc. pay. / Sales (10% Ind. Av.) 73.41% 65% 55% 45% 35% 30% 20% 10% 10% 10% 10%

Actual Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast Forecast

Income Statement 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Sales $413.3 $743.9 $1,190.2 $1,904.3 $2,856.4 $3,999.0 $5,198.7 $6,238.4 $7,174.2 $7,891.6 $8,286.2

Costs (excl. depr.) 780.3 892.6 1,071.2 1,523.4 1,999.5 2,399.4 3,119.2 3,743.1 5,380.6 5,918.7 6,214.6

Depreciation 28.8 49.9 56.4 60.9 75.0 96.0 83.2 99.8 114.8 126.3 132.6

Total op. costs $809.1 $942.6 $1,127.5 $1,584.4 $2,074.5 $2,495.4 $3,202.4 $3,842.9 $5,495.4 $6,045.0 $6,347.2

EBIT -$395.8 -$198.7 $62.6 $319.9 $781.9 $1,503.6 $1,996.3 $2,395.6 $1,678.8 $1,846.6 $1,939.0

Net operating profit after taxes -$257 -$129 $41 $208 $508 $977 $1,298 $1,557 $1,091 $1,200 $1,260

Net operating working capital $213 $172 $122 $258 $571 $1,000 $1,820 $2,495 $2,511 $2,367 $2,486

Total operating capital $775 $796 $827 $1,020 $1,509 $2,199 $2,859 $3,743 $3,946 $3,946 $4,143

FCF = NOPAT – Δ op capital N/A -$150 $9 $15 $20 $287 $638 $673 $888 $1,200 $1,063

Weighted average cost of capital (WACC) 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00% 12.00%

Long-term constant growth in FCF 4.00%

Horizon value $13,819.53

FCF in Years 1-3 and FCF4 + horizon value in Year 4 $ (149.52) $ 9.36 $ 14.83 $ 19.69 $ 286.57 $ 637.76 $ 673.33 $ 888.45 $ 1,200.32 $14,882.57

Value of operations (PV of FCF + HV) $6,270.79 Plus Value of Mkt. Sec. $ -

Total Value of Company $6,270.79

Less Value of Debt $ 467.00 Less Value of Pref. $ -

Value of Common Equity $5,803.79

Divided by number of shares 115.32

Price per share $ 50.33

2013 2014 2015 2016 2017 2018 2019 2020 2021 2022

Required Increase in Assets 217.32$ 245.78$ 471.92$ 717.48$ 994.05$ 608.35$ 561.89$ 380.94$ 136.61$ 272.43$

Less Spontaneous Increase in Payables and Accruals 217.32$ 205.31$ 264.22$ 209.47$ 279.93$ (75.98)$ (343.11)$ 159.08$ 121.96$ 67.08$

Less Addition to Retained Earnings $0.0 $40.5 $207.7 $508.0 $977.1 $1,297.3 $1,556.9 $1,090.9 $1,200.1 $1,260.1

Additional Funds Needed (AFN) to Support Growth -$ -$ -$ -$ (262.99)$ (613.01)$ (651.86)$ (869.09)$ (1,185.42)$ (1,054.73)$

Sustainability and current stock price can be met assuring stable product(s) life cycle growth and key operating ratios in conformance to industry average.

Our Recommendations

• —Raise more equity (US$6billion)

o —Current leverage level makes business too risky

o —Additional equity will optimize cost of capital

• —Merge with another company

o —Tesla will provide a natural hedge for

companies without an electric vehicle line

o —Will enhance portfolio of companies with electric

vehicle lines

• —Adapt Strategy

o —Reduce R & D expenditure

o —Change distribution strategy to include third party

dealerships